2015 (3) TMI 1142 - AT - Customs

Re-assessment in terms of rejection of transaction value- Appellants imported cloves describing them as Cloves FAQ Grade CG-3 (origin as Madagascar as per contract and declared value of USD 2000 PMT CIF- The primary adjudicating authority held that no grade or quality has been mentioned in the contract and same mentioned in the invoice to hoodwink the revenue therefore the transaction value rejected and assessed at USD 3000 PMT (CIF) on the basis of value of identical goods under Rule 5 of Custom Valuation (Determination of Valuation of Imported Goods) Rules, 2007- Held that appellants produced international Trade Centre (UNCTAD/WTO) Market Brief 2006 regarding market of clove in European Union wherein it is clearly stated that in the EU the most popular quality is CG-3 quality from Madagascar and Zanzibar. Obviously, the adjudicating authority has mis-guided himself into believing that there was no CG-3 grade cloves and so the appellants tried to hoodwink Revenue. It is also seen that the re-assessment has been done only on the ground of adopting the value of identical goods sold for export to India and imported at or about the same time as the goods being valued. In this regard, it is useful to refer to the definition of identical goods given in Rule 2(d) of the said Valuation Rules in terms of which one of the conditions for the goods to be called identical goods is that they should be produced in the country in which the goods being valued were produced. This condition is obviously not satisfied as it is an admitted fact that the impugned cloves are of Madagascar origin while the value adopted for re-assessment was in respect of cloves of Zanzibar origin. In the case of CC, Chennai v. Forte Garments 2001 (12) TMI 184 - CEGAT, CHENNAI, the Tribunal noted that for the purpose of enhancing value, Revenue is required to produce contemporaneous imports from the same country pertaining to the same goods and the same time and quantity and quality in order to reject the transaction value. Therefore, the reassessment under Rule 5 ibid based on the value of cloves of different country of origin is unsustainable. - Decided in favour of appellant with consequential relief

Summary

Issues:
1. Rejection of transaction value and re-determination of value by the primary adjudicating authority.
2. Adoption of value under Rule 5 of Custom Valuation Rules.
3. Consideration of contemporaneous imports for valuation.
4. Interpretation of "identical goods" and "similar goods" under Valuation Rules.
5. Relevance of country of origin in determining value.

Analysis:
1. The primary adjudicating authority rejected the transaction value declared by the appellants for imported cloves, citing lack of grade or quality mentioned in the contract. The authority re-determined the value at USD 3000 per MT (CIF) based on identical goods' value under Rule 5 of Custom Valuation Rules.

2. The primary adjudicating authority justified the re-assessment under Rule 5, which states that the value of imported goods should be the transaction value of identical goods sold for export to India and imported around the same time. This led to the adoption of the value of cloves of Zanzibar origin for re-determining the value.

3. The Order-in-Appeal noted that contemporaneous imports of cloves of Zanzibar origin influenced the valuation, even though the imported cloves were of Madagascar origin. The appellants presented evidence from the international market indicating the existence of CG-3 grade cloves from Madagascar and Zanzibar, contradicting the authority's assertion.

4. The definition of "identical goods" and "similar goods" under the Valuation Rules requires the goods to be produced in the same country as the goods being valued. The Tribunal's precedent emphasized the need for contemporaneous imports from the same country to reject transaction value, which was not satisfied in this case.

5. The respondent relied on a previous judgment to argue that country of origin is irrelevant in determining value. However, the Tribunal distinguished the present case, where the appellants provided sufficient evidence of the grade and quality of the imported cloves, unlike the case cited.

In conclusion, the Tribunal found the re-assessment of the imported goods unsustainable due to the incorrect application of valuation rules and the lack of consideration for the actual grade and origin of the imported cloves. The appeal was allowed, providing consequential relief to the appellants.